The Impact of TRID Debated Within The Industry

By rchrisman@robchrisman.com

 

(Thanks to Stephen S. for this one.)

A grandmother was pushing her little grandchild around Walmart in a buggy.

Each time she put something in the basket she would say, "And here's something for you, Diploma," or "This will make a cute little outfit for you, Diploma," and so on.

Eventually a bewildered shopper who had heard all this finally asked, "Why do you keep calling your grandchild Diploma?"

The grandmother replied, "I sent my daughter to Virginia Tech and this is what she came home with!"

 

Research by RealtyTrac finds the percentage of homes that were bought and sold within 12 months (i.e. flipped) soared to 5.5% of all homes, reaching a 10 year high. Shame "flipped" has the connotation that it does.

Training and upcoming events just don't stop, including one early this morning...

 Join Data Facts today, March 21 at 10AM EDT, 7AM PDT, for a complimentary webinar 'Changes in Residential Lending that Should be on the Radars of LOs to CEOs.' I am honored to discuss interest rates, "Know Before You Owe" issues, the merger and acquisition environment, marketing service agreements, hiring Millennials, the continuing QM versus non-QM discussion, measuring borrower satisfaction, using trended credit data, and more.

 Your chance to be part of the Most Visionary Organizations in the Mortgage Industry in the April edition closes soon. National Mortgage Professional Magazine is seeking a few good Visionary Organizations in the Mortgage Industry. If you're one of the companies that's changing the mortgage industry, this is your chance to share the original vision and where the company is headed with the mortgage community. The deadline is Wednesday, March 23. Learn more here.

 Are you geared up for Vegas? Join the National Association of Mortgage Professional Women April 18-20 for its annual conference at The Luxor Hotel & Casino. Details and registration is available here.

 Take a break and join Oklahoma Mortgage Bankers Association's event "Take a Break". This event is designed to give back to the industry. Featuring James Carley- CFPB Southeast Region Director along with David Lykken - Transformational Mortgage Solutions and Natalie Hunt - Director, Strategic Product Management, Single Family Division, Fannie Mae.  The event will be held starting tomorrow, Tuesday, 3/22 from 1:00 - 5:00pm in Oklahoma City, OK.  For additional information and link to register email Carol Clark.

 Based on continuing review of TRID practices and feedback received from past TRID webinar attendees, AmeriHome is presenting a new TRID webinar series to further clarify TRID requirements and provide more in-depth information designed to address areas of Seller interest.  New Webinar Schedule is listed below, registration is available here. 

Wednesday, March 30, 10AM PDT, Thursday, April 7, 11AM PDT, and Wednesday, April 13, 11AM PDT. 

 Join the CFPB Tuesday, April 12 at 2PM EDT for a 60-minute webinar to answer some frequently asked questions about the Know Before You Owe mortgage disclosure rule.  The webinar will be hosted by the Federal Reserve. Click here to register for the webinar.

 Even inside the industry we can't agree on the impact of TRID.

 Ellie Mae's February Monthly Origination Insight Report, released last week, showed a significant drop in loan closing times from 50 days to 46 days. The report also indicated that credit was easing given the increase in closing rate from 68.4% to 69.9%.

 But wait - the MBA's fourth quarter survey of independent mortgage banks (and mortgage subsidiaries of chartered banks) found a drop in profitability from $1,238 per loan in the third quarter of 2015 to $493 in the fourth - down 60%! The MBA's Marina Walsh, who always has all the bases covered, said that, "Mortgage bankers saw their total loan production expenses climb to $7,747 per loan, from $7,080 per loan in the third quarter. (Total loan production expenses are commissions, compensation, occupancy, equipment, and other production expenses and corporate allocations.)

 The fourth quarter marked the second highest level of production expenses per loan since the inception of our report in the third quarter of 2008. However, the average production volume per company was nearly double the first quarter of 2014, when production expenses reached a study-high of $8,025 per loan. The increase in total production expenses per loan in the fourth quarter of 2015 cannot be explained solely by volume fluctuations."

 The MBA also found that productivity decreased to 2.4 loans originated per production employee per month in the fourth quarter of 2015 compared to 2.5 in the third quarter. Personnel expenses averaged $5,131 per loan, up from $4,674 per loan in the third quarter.

The "net cost to originate" was $6,163 per loan compared to $5,549 the prior quarter (all production operating expenses and commissions, minus all fee income, but excludes secondary marketing gains, capitalized servicing, servicing released premiums, and warehouse interest spread). Total production revenue (fee income, secondary marking income and warehouse spread) remained unchanged between quarters at 362 basis points.

 The TRID & overall regulatory plot continues to thicken. The National Association of Federal Credit Unions released President and CEO Dan Berger's letter to House Financial Services Committee Chairman Jeb Hensarling (R-Texas). Berger wrote, "Unfortunately, many of our concerns about the increased regulatory burdens that credit unions would face under the CFPB have proven true...As expected, the breadth and pace of the CFPB's rulemaking is troublesome, and the unprecedented new compliance burden placed on credit unions has been immense...The assertion that credit unions are not being negatively affected by the tidal wave of overregulation arising from CFPB and Dodd-Frank could not be more wrong. Director Cordray's denial that the tide of regulation is not contributing to the continued trend of credit unions being forced to cut back on member services, merge or go out of business flies in the face of facts."

 And the NAFCU reminded us that since the second quarter of 2010, we have lost over 1,350 federally-insured credit unions, 96% of which were smaller institutions below $100 million in assets, the NAFCU added in a statement.

 The American Bankers Association weighed in with its thoughts on TRID based on a survey of its members. Are the regulators listening? "Banks are still struggling to comply with the Consumer Financial Protection Bureau's 2015 TILA-RESPA Integrated Disclosure rule, or TRID, according to an American Bankers Association survey. The survey, conducted in February of this year, found that 25 percent of respondents have eliminated certain mortgage products because the rule does not provide enough clarity. Some of the offerings banks have eliminated include construction loans, adjustable rate mortgages, home equity loans or payment frequency options.

More than 75 percent of survey participants said loan closings are being delayed as a result of TRID. On average, those bankers reported a delay of 8 days with responses ranging from one to 20 days. More than 90 percent said front-boarding and loan processing times have increased.

 "Although residential originations fell by roughly 15 percent in the fourth quarter on a sequential basis, warehouse lenders saw their commitments inch up slightly, according to new figures compiled by Inside Mortgage Finance. At Dec. 31, warehouse banks had extended an estimated $49.0 billion of commitments to non-depository lenders, a 2.1 percent sequential gain. Compared to yearend 2014, commitment levels rose a handsome 28.9 percent. Part of the reason for the increase in activity - especially year-over-year - can be explained by nonbanks continuing to increase their origination market share and, therefore, their thirst for credit. Before interest rates tanked in early January, most warehouse executives were bracing for a down year, but some officials are starting to hear their telephones ring with requests for new credit. Several managers interviewed by Inside Mortgage Finance confirmed that warehouse profitability has increased thanks to delays in loan closings caused by the integrated consumer-disclosure rule known as TRID."

 But John Jacobs responded, "I have challenged these authors at Inside Mortgage Finance regarding this false statement about warehouse lines having increased dwell time because of TRID, but they just don't get it. I told them a loan is not in the line until it closes. Having delays due to TRID in getting loans closed, does not increase warehouse hold times. TRID may be responsible for delays in getting loans sold, but that is not what they continue to claim. And these guys are experts?"

 Andrew Liput from Secure Insight sent, "In a survey conducted March 7th through March 14th of 1,342 mortgage industry executives nationwide regarding the impact of TRID and the new Closing Disclosure on their lending business, the responses were informative. The overwhelming majority of lenders we polled were prepared for TRID, and have trained their office staff to support the completion and delivery of the new consumer disclosures (93%), although the fact that 7% of those polled were "not aware of CFPB TRID obligations" and "not full TRID compliant at this time" was somewhat surprising several months after the new disclosures became mandatory throughout the industry.

 "The impact of the new Closing Disclosure on lender-settlement agent business relationships, something we focused upon, was positive. Lenders rated their experience working with settlement agents on the disclosure roll-out as generally very good. More than 80% of the poll respondents indicated that they had created specialized training programs for their agent partners to help ensure a smooth transition to the new disclosure form. As we found when we polled agents recently, the biggest complaint lenders had was centered on increased operating costs. Over 57% of respondents have experienced 'significant operational cost increases' while 36% saw some increase. These costs are impacting budgets, staffing needs and consumer rates and fees. Unlike our poll of agents however, lenders seemed to feel the new disclosures have in fact had a positive impact on the consumer experience, with 82% stating that they felt they Closing Disclosure had a 'positive impact on the overall transparency and efficiency of the closing process.'"

 And lenders are still addressing the issues. For example, from LDWholesale Ginny Walker writes, "On the heels of ClosingCorp's consumer survey where 64 percent of respondents said it was easier to get a mortgage under the old rules rather than TRID, I wanted to share with you that LDWholesale is working to make the TRID process easier. We have updated our website to include consolidated TRID-related information and training materials in one convenient online Resource Center: visit the Resource Center and download answers to TRID FAQs."

 Turning away from TRID and toward interest rates, tor news this week we have a fair amount under the "housing" group. Today at 10AM EDT we have February Existing Home Sales. Tomorrow is the January FHFA Housing Price Index. Wednesday includes the MBA Mortgage Index and February New Home Sales. Thursday is the usual Jobless Claims but also February Durable Goods Orders. Friday is the Q4 GDP and GDP Deflator numbers - the third estimate.

 To keep things in perspective, in 2016 we hit a low on February 11^th of 1.64%; we closed Friday at 1.87%. We've chopped around here yield-wise for quite some time, and some pretty smart folks out there are saying there isn't much to move us one way or another. And this morning we're at 1.88% and agency MBS prices are roughly unchanged from Friday's close.